Shineco(SISI) - 2024 Q4 - Annual Report

Acquisitions and Investments - Shineco Life acquired 51% of Changzhou Biowin Pharmaceutical Co., Ltd. for US $9,000,000 in cash and 326,000 shares of common stock[161]. - On September 19, 2023, Shineco Life closed the acquisition of 71.42% equity interest in Chongqing Wintus Group for US$ 2,000,000 and 1,000,000 shares of common stock[162]. - The acquisition of Biowin allows the company to enter the Point-of-Care Testing industry, focusing on rapid diagnostic products[163]. - The company has divested its equity interest in Tenet-Jove, terminating its VIE structure[162]. - The company completed a capital injection of RMB 4.8 million (approximately US $0.70 million) for a 32% equity interest in Gaojing Private Fund, and plans to transfer this interest by March 31, 2025[211]. Business Segments and Operations - The company operates three main business segments: Rapid Diagnostic Products, Agricultural Products, and Healthy Meals, with products sold in multiple countries including China, Germany, and the United States[163][165][166]. - The company’s agricultural segment includes silk and fresh fruit distribution, with operations in Chongqing and sales in various international markets[165]. - The company plans to expand its health-oriented restaurant chain, Fuzhou Meida, into key cities across China[166]. Financial Performance - Revenue for the year ended June 30, 2024, was$ 9,801,856, representing an increase of $9,251,380 or 1,680.61% compared to$ 550,476 in 2023[195]. - Cost of revenue for the year ended June 30, 2024, was $8,919,688, an increase of$ 8,495,397 or 2,002.26% compared to $424,291 in 2023[199]. - Gross profit for the year ended June 30, 2024, was$ 882,168, an increase of $755,983 or 599.11% compared to$ 126,185 in 2023[195]. - General and administrative expenses for the year ended June 30, 2024, were $17,522,624, an increase of$ 8,912,032 or 103.50% compared to $8,610,592 in 2023[206]. - Selling expenses for the year ended June 30, 2024, were$ 311,989, an increase of $174,602 or 127.09% compared to$ 137,387 in 2023[207]. - Research and development expenses for the year ended June 30, 2024, were $113,426, a decrease of$ 22,423 or 16.51% compared to $135,849 in 2023[207]. - Net loss for the year ended June 30, 2024, was$ 24,352,735, an increase of $10,396,704 or 74.50% compared to$ 13,956,031 in 2023[195]. - The company recorded a net loss from continuing operations of US $33,207,982 for the year ended June 30, 2024, an increase of 210.03% from the previous year's loss of US$ 10,711,168[217]. - The company reported a net loss of US $24,352,735 for the year ended June 30, 2024, a 74.50% increase from the net loss of US$ 13,956,031 in 2023[219]. Revenue Recognition and Accounting Policies - Revenue is primarily generated from sales of Luobuma products and other services, recognized when goods are delivered and collectability is probable[189]. - The adoption of ASC 606 did not result in material changes to the timing and pattern of revenue recognition for the Company's current revenue streams[190]. - The Company adopted the CECL methodology for credit losses on July 1, 2023, with no material impact on consolidated financial statements[185]. Cash Flow and Financing Activities - The company raised approximately US $6.4 million from a securities purchase agreement for 1,400,000 shares at US$ 5.00 per share, with the remaining proceeds received in July 2024[172]. - The Company completed a public offering of 1,869,160 shares at a price of US $1.07 per share, raising approximately US$ 2.0 million in gross proceeds, with net proceeds of about US $1.6 million after expenses[173]. - A securities purchase agreement was entered into for the sale of 14,985,000 shares at US$ 0.55 per share, generating gross proceeds of US $8,241,750, closing on September 10, 2024[175]. - The Company generated approximately US$ 11.0 million in net cash from financing activities for the year ended June 30, 2024, driven by proceeds from common stock issuance and short-term loans[251]. Economic and Operational Risks - The Company faces economic and political risks primarily in the PRC, which could adversely affect financial performance due to changes in governmental policies and economic conditions[178]. - The COVID-19 pandemic has caused significant disruptions, impacting product delivery and customer payments, with ongoing uncertainty regarding future economic conditions[179]. Inventory and Working Capital Management - As of June 30, 2024, the inventory reserve from continuing operations was US $30,443, down from US$ 56,655 in 2023, indicating improved inventory management[188]. - As of June 30, 2024, the Company had a working capital deficit of US $6.7 million, a significant decrease of US$ 35.6 million or 123.0% from US $28.9 million in working capital as of June 30, 2023[237]. - The Company has negative working capital and relies on financial support from shareholders to continue operations over the next twelve months[235]. Interest Expenses and Debt - The company recorded an increase in net interest expenses of 78.52% to US$ 1,622,346 for the year ended June 30, 2024, compared to US $908,759 in 2023, mainly due to new acquisitions[214]. - The company had approximately US$ 13.5 million in short-term bank loans and US $1.7 million in long-term bank loans outstanding as of June 30, 2024[224]. - The company expects to renew all existing bank loans upon maturity based on past experience and outstanding credit history[224]. Impairment and Other Income - Impairment loss on goodwill amounted to US$ 14,824,819 for the year ended June 30, 2024, due to lower-than-expected revenue and profit[212]. - Net other income increased by 22.84% to US $222,910 for the year ended June 30, 2024, compared to US$ 181,471 in the same period in 2023, primarily due to increased government subsidies[212].